For those contractors who have found a contract or are seeking to go contracting in British Virgin Islands, then the financial regulatory aspects have to be considered very carefully. There are a number if ways of dealing with this, but if the right option is chosen then the contractor can focus on the contract and avoid unnecessary administration, knowing that the law is being complied with and tax is minimised.
Contracting in British Virgin Islands – Personal Arrangements
Contracting in British Virgin Islands will involve all sorts of basic personal arrangements – finding somewhere to live, organising transport, electricity, water, phone/internet and so on. Some contractors might even be relocating their families, with schooling to organise and children to settle in. Then there are the challenges of trying to integrate into the local society and enjoy a normal life – it can be quite an emotional load for many people in addition to all the challenge of a new contract, new colleagues and perhaps some language and cultural issues to adjust to.
Tax for Contractors in British Virgin Islands
British Virgin Islands has its own payroll and social security system. Besides the everyday issues we mentioned above, learning about a new employment structure, taxation and social security rules can be very demanding if a contractor is not to fall foul of the rigorous fiscal system in British Virgin Islands. All the basics, such as printing a client invoice with a sales tax, have to be investigated and understood for an invoice to be legally compliant. There are several ways to deal with tax for contractors in British Virgin Islands, so let’s discuss the pros and cons of those options.
Difficulties for a UK Ltd Company in British Virgin Islands
Many contractors will be familiar with the concept of a ‘service company’ which basically sells their services through a limited liability personal company. Many UK contractors do this in the UK (where IR35 rules have made this a more challenging route than it used to be). However, the option of trying to organise a UK Limited company to handle contracting in British Virgin Islands is very challenging. If the company was much more than a one- or two-person service company it might be worth incurring the expense of the complex legal and accounting advice required. To register for the local payroll taxes and social security is tricky, and for a sole contractor it is impractical at best.
A Local Ltd Company in British Virgin Islands
Another option would be to set up a Ltd company in British Virgin Islands. This can be a practical approach if one is settling permanently in a country, but for nationals of countries other than British Virgin Islands it is not recommended. The responsibilities on Directors of a company registered in British Virgin Islands are onerous, and audit and other regulatory compliance requirements are burdensome. For a contractor in British Virgin Islands, they can be a great distraction to the contract in hand and this option is unlikely to prove either cost-effective or helpful to one’s stress levels.
Some UK contractors will be familiar with the concept of an umbrella company – a third party company which handles all the client billing, tax deductions (both payroll and VAT), social security deductions and other compliance issues, leaving the contractor to get on with the contract and maximise their income. Of course they deduct fees too, before paying the contractor. The contractor receives timely income, complete with payslips and tax certificates and without having to chase the ultimate client every month. It is in the interests of the umbrella company to look after the contractor – there is competition and the contractors are their source of income. So, there is a great load taken off the contractor’s shoulders – the administration is limited mainly to the weekly or monthly time-sheet cycle.
If the contractor were to cost the time required for all the administrative hassle with a normal limited company, then it would be clear that for most contractors this was by far a better approach. Most clients try to extract the maximum time out of their contractors (who are usually very committed people anyway). Time saved on complex admin (‘below a contractor’s pay grade’) is valuable – either to service the client or enjoy some leisure. Cash flow is usually smoother and predictable, with net fees being paid across on the day received.
Our knowledge of the British Virgin Islands umbrella company market is second to none – we know the providers, their specialisations, their strengths and weaknesses. When we understand an individual contractor’s specific needs, then we provide introductions to appropriate contractor management companies which are most likely to offer the best fit. So, we save contractors valuable time and effort, just when they are under pressure to organise their move to British Virgin Islands – they can focus on their preparations and client engagement. Our advice is free to the contractor, and although we receive a referral fee from the umbrella company, our advice is impartial too.
Benefits of an Umbrella Company for Contractors in British Virgin Islands
In addition to simple regulatory compliance and contractor time saved, the benefits of using an umbrella company are considerable. Every umbrella company in British Virgin Islands knows the rules, and can ensure that the maximum possible income stream flows from the contract. Tax for contractors in British Virgin Islands is minimised, and the contractor can focus on servicing the ultimate client without a complex administrative and regulatory overhead.